But missing from Saul’s explanation of his approach, if he cares to comment, is that he DID do something different 3 weeks before the Y2K crash…he sold out! That’s IS distinctly different from what he did in 2008…I am not sure what his returns would have been if he did in 2000 what he did in 2008…So again, it appears to me that Saul did time the market in 2000…and perfectly so. Perhaps had he jumped ship in early 2008 as he did in 2000, the returns would have mirrored his earlier results.
Hi Duma, A few clarifications and thoughts:
I DIDN’T “sell out” in the internet crash in 2000. I sold out of my internet stocks which were going crazy, but bought others and STAYED FULLY INVESTED. I was up 19.4% on the year in 2000, the year of the internet crash.
In 2008 I DID WHAT I WAS SUPPOSED TO DO. I bought good stocks which had gone down the most, and sold more conservative stocks, which hadn’t fallen much, for cash. This allowed me to be up 110.7% in 2009.
However this was just from the END of 2008 to the end of 2009. From the actual bottom in November 2008, I was actually up 132.6% in the thirteen and a half months to the end of 2009. So I think my method was reasonably successful considering the circumstances.
I think that there were two factors that contributed to my big loss in 2008.
FIRST, my stocks were much larger beta than the S&P. Probably much more risky than the low PE and low 1YPEG stocks I currently have.
SECOND, the melt-down in 2008 was a once in 80 years kind of phenomenon (since the Great Depression of the 1930’s), much worse than anything else I’ve seen in my lifetime at least, and I’m an old guy. The Internet bubble bursting was nothing compared to it (the rest of the economy and market did fine), neither was the 1987 big market drop and recovery. What made 2008 different is that it was a crash of the economy, the banking system AND the markets. If the Fed hadn’t bailed us out, and if we hadn’t had the safety nets (that weren’t there in the 30’s), it might have BEEN another Depression like the 30’s. It certainly was no fun.
BUT a year like that is not something that anyone has any success in predicting with accuracy. And, considering my results over 26 years investing as I’ve been doing, I don’t consider that having had a bad year under those circumstances something for me to worry about, or a reason to change the way I invest. It would be like not flying because there might be a plane crash, or not going out walking because you might be hit by lightning. (Each year in the USA there are an average of 73 people killed by lightning. It’s not a zero probability, just not a reason to not go walking.) I’m quite content with my long-term results, as well as with my results so far this year.